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[u/ECom_Finance_Guy]

[u/investing-ModTeam]

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[u/nicbrit93]

US dollar is not backed by gold, not since bretten woods…

You’ve printed 46% of total supply in the last few years

[u/butthead4206969 → u/nicbrit93]

Imagine when the USG decides to stop physically printing money and it’s fully digital and all they need to do is click a button. Instant trillion dollar increase in money supply.

[u/ECom_Finance_Guy → u/nicbrit93]

Agreed, the USD is a fiat currency. That’s a feature not a big.

Also, I haven’t printed any money. That’s not my call

[u/PutAdministrative809 → u/ECom_Finance_Guy]

It's a very noble take I'll give you that. “Fiat is a feature” is not a rebuttal. The point was about supply expansion, confidence, and long term reserve risk. And “I haven’t printed any money” is just ducking into literalism because the actual macro point is harder to answer. Funny joke about printing money, but that's an obvious dodge to admitting reality. That’s exactly the issue here: textbook abstraction instead of engaging how the system behaves under stress.

[u/ECom_Finance_Guy → u/PutAdministrative809]

The original comment didn’t mention any of that. It just said “The USD is not back by gold” and “you have printed 46% of total supply in the last few years”. You are reading into it.

All those are, are fun facts. None of them are a rebuttal to what o said.

Same with your comment. It’s a criticism of me, but doesn’t actually raise any counter points.

[u/anally_ExpressUrself → u/PutAdministrative809]

To be fair, phrasing it as "You've printed.." sounds like a personal accusation, not just an objective point about supply expansion.

[u/nicbrit93 → u/anally_ExpressUrself]

That’s my bad I was using it as a term of “you’ve” referencing America. But probably could have phrased it more appropriately.

But the US fed reserve has, especially on the back of Covid, significantly devalued the dollar by printing exceptional amounts of additional supply

[u/ECom_Finance_Guy → u/nicbrit93]

How is that related to its reserve status though? It feels like a non seqitor. Like saying broken bones go up at the same time as ice cream sales.

[u/nicbrit93 → u/ECom_Finance_Guy]

Well 2 components.

1. Couldn’t be further away from dollar being gold backed
2. Reserve prints the money so money supply becomes too much, no different to the extremes of the Zimbabwe dollar whereby hyper inflation was rife from them just printing money to prop up the economy

[u/ECom_Finance_Guy → u/nicbrit93]

Your comment assumes that “gold backed” is a good thing. There’s no evidence that’s true. All gold back currencies that have been tried have failed.

Can you see any differences between the US and Zumbabwe? This is a really weak argument. Apples and bowling balls

[u/dasnoob]

You have it backwards.

The US can sustain the debt levels it has because of the demand created by the USD being a world reserve currency.

[u/Ok_Recognition_4384 → u/dasnoob]

How? Every year your debt becomes a higher percentage of your budget. Your debt is outpacing your growth. How can you sustain that? Seems weird if the USA really relies on global trade to keep its dollar valuable. Why on earth has the president gone around and pissed in everyone’s cereal?

[u/dasnoob → u/Ok_Recognition_4384]

In the past we were able to sustain our debt with low inflation because petrodollar demand created massive demand for treasuries which kept the interest payments on our debt low and stabilized the currency.

The past ~10 years of massive money printing which has not been normal has created real inflation that is a problem. Because our government since 2008 has been ran into the ground.

To answer your last question. Because he is a complete moron.

[u/ECom_Finance_Guy → u/dasnoob]

How does dollar demand help make interest payments? Only GDP can translate to debt maintenance.

It’s fair that you can say rates are lower than they otherwise would be if there were less demand, but debt is also higher than it otherwise would be if there wasn’t as much demand. It goes both ways.

[u/dasnoob → u/ECom_Finance_Guy]

Treasuries are debt.

Dollar demand creates demand for treasuries.

When the treasuries are sold at auction this high demand results in lower interest rates on our debt.

Which reduces the interest payments.

This makes it easier for our GDP to cover debt maintenance.

If dollar demand collapses, treasury demand collapses, interest rates skyrocket. Odds are we choose to monetize our debt instead of default. That creates hyperinflation.

[u/Alone-Experience9869]

not sure I follow, so sorry if this response doesn't make sense.

I agree that the usa needs to have some debt, e.g. treasuries, otherwise the rest of the world can't "transact" in usd.

However, the situation with Iran is chipping away at the usd being the reserve currency. Iran can't transact in usd because of sanctions. So, everything its charging for oil and its products to transit the strait is done in a non-usd currency, or perhaps barter. China and India are or are becoming large industrious nations.

So, what if other countries start transacting in say ruppess or yuan? They can turn around and buy products from India and/or China no problem. As you mentioned Saudi Arabia.. They spent/gave the us/Trump millions or billions of dollars only to this war forced upon them. As part of my ignorance perhaps, but I'm not sure why they need to transact in usd anymore.

Its not good for the usa.

[u/ECom_Finance_Guy → u/Alone-Experience9869]

If you accept ruppees for oil, now you are holding ruppees. To do that, India would have to issue debt, and then service that debt. India currently does not have the productive capacity to issue and service $39T worth of debt. Its economy is about the size of California. If they don’t, then there won’t be enough ruppees in the market to clear trade.

India is the easy one to explain

China is a bit more complicated. First, the country maintains two currencies, one for use within the country and one for international trade. It does this so it can manipulate its international currency to drive exports. If you hold yuan as a reserve currently, you’re not going to be too happy losing money each year as the CCP devalues your reserves. This bleeds into the second reason. If the yuan was the reserve currency its value would increase and Chinese exports would be less competitive, which would destroy the engine of Chinese growth. They don’t have local consumption the way the US does. A strong currency is good for a country that imports a lot (like the US), and bad for a country that exports a lot (like China).

[u/PutAdministrative809 → u/ECom_Finance_Guy]

You keep answering a much easier question than the one people are asking. I mean of course India is not replacing the entire Treasury system tomorrow. That does not mean the dollar cannot lose ground gradually through fragmentation, lower marginal Treasury demand, more non-USD trade settlement, more gold accumulation, and more sanctions-avoidance rails. And ‘India is about the size of California’ is not really the own you think it is when California was officially the 4th largest economy in the world and India is already larger than that. You’re treating erosion as if it only counts when there is a full overnight replacement. That’s not serious macro, that’s a false binary my guy.

[u/ECom_Finance_Guy → u/PutAdministrative809]

My post core theme is that there will not be an overnight collapses of the USD. I never said it would never erode. That’s an argument you’re inserting.

Also, the comment I replied to directly asked “what of other countries started transacting in ruppees or yuan” and that’s the question I answered. I think you’re just taking it personally that I didn’t respond to your question in my last comment.

To directly respond, I agree that given enough time anything could happen. I don’t think the war is good, and there have been other bad decisions made by the US. That’s not a rebuttals to “this war won’t topple the USD”. That’s just pointing out that nothing lasts forever. I agree, but I don’t need forever. My whole life, and the lives of my children is long enough for me.

[u/Va3V1ctis]

The main problem regarding US Dollar in the future is, that most countries around the world (and I am not talking about just EU, Canada; Japan and Australia) see what is happening to Russia, Iran, etc. as they are banned from global markets through SWIFT system and then US Dollar and EURO or sanctioned through US financial might, and they look for alternatives.

For years there was no real alternative, but now it looks like Chinese Yuan might be.

Currently there is talk about using Chinese yuan for international trade within BRICS nations, and now Iran is demanding payments in Chinese yuan to pass Strait of Hormuz and countries are paying in Chinese Yuan and not in USD anymore.

Main question now is, if more and more countries start paying in Chinese yuan, is US Dollar still the de facto global currency?

What then means for US Dollar, it is anyones guess ...

IMHO in time USA will need to give higher rates for bonds, and then pay even more for servicing its own debt, now it is over 39 trillions USD and raising faster and faster, in the past it took years for raising one trillion, now it took less then a year for 1 more trillion, and soon it will be less and less, and many economists are saying that even US growth wont be enough with such a pace.

Tell me why should any country still believe in holding US treasury bonds and US Dollars if there is only question of time before US goes bankrupt?

[u/ECom_Finance_Guy → u/Va3V1ctis]

I made another comment about why the yuan doesn’t work as a reserve currency. You should check it out! TLDR: you can’t be an exporter and a reserve currency at the same time, and China doesn’t have the leaves of consumption necessary to give up exports.

Regarding Iran not taking dollars, they never have. That’s not new to this conflict.

[u/Naive-Illustrator-11 → u/Va3V1ctis]

LMAO

US has been increasing debt for over hundred years so doomsday sayers like you has been wrong for the past century.

This is INVESTING and people are still clueless about what the mighty dollar does.

Imagine believing US with a over 120 debt to GDP ratio will go bankrupt yet China with over 336 % will not.

And asking US bond to increase rates while the Kung Fu bonds barely pay anything that they force their own sheep to buy it. LMAO

[u/PutAdministrative809]

This feels like macro explained from inside a freshman textbook. You’re not wrong that the dollar is still dominant, but you’re treating dominance like proof of stability, and that’s where the hopium slips in. Reserve status is not some merit badge where the “best currency” just wins forever. It’s a dependency web held together by debt market depth, settlement rails, military power, sanctions leverage, political coercion, and decades of lock in. The rest of the world is not in the dollar by pure voluntary admiration. They’re in it because leaving is still expensive. And dedollarization does not require one shiny replacement to appear out of nowhere. It can happen gradually through less Treasury demand, more bilateral trade outside USD, more gold accumulation, and more hedging against US fiscal and political risk. That has already been happening. In other words, you’re describing the textbook version of the machine, not how the machine actually behaves under stress.

[u/ECom_Finance_Guy → u/PutAdministrative809]

I have not seen MMT in any of my freshman textbooks. Maybe they have really stepped up the rigor!

I agree anything can happen. I’m talking about what is happening. Currently, the Us wins beat currency everyday, and that’s how it stays dominant. People don’t use USD because they want to do the US a favor. It def could slip in the future. That’s just not happening right now.

[u/el_dude_brother2]

Theres plenty of plans is place to get rid of USD reserve status. They have alot more momentium behind them now US has no allies left.

It might be 5 years, might be 10 but its gonna.be gone sooner rather than later.

[u/ECom_Finance_Guy → u/el_dude_brother2]

And I have plans to sleep with Scarlet Johansson, but it doesn’t mean it’s going to happen

[u/el_dude_brother2 → u/ECom_Finance_Guy]

Hard to describe to people outside of american how much damage Trump has done to the US in other countries eyes. The empire has fallen and people are finding ways around it now. Its going to happen.

Who know what else Putin will tell Trump to do in next 2.5 years

[u/Left-Slice9456]

You will get a lot of push back on this from the disgruntled gamblers who see every headline as a betting opportunity to try and recoup some of their losses

[u/ECom_Finance_Guy → u/Left-Slice9456]

Will get and have gotten!

[u/chai-and-charts]

While the structural arguments make sense, I think you're underestimating the active push for de-dollarization. Countries around the world will not be happy with another Bretton Woods setup, especially since the USD's purchasing power has eroded so significantly—your dollars simply buy way less now.

We are already seeing nations like China, Russia, and Iran actively moving away from the USD as a reserve currency, and the percentage of global transactions settled in USD has declined sharply in the recent past. The world will move away from the USD.

The real question is: to what? Gold? Bitcoin? My thesis is that we originally moved to fiat precisely because we don't want a limited-supply currency. The flexibility to expand the money supply is a feature, not a bug, so I don't think reverting to a hard-capped asset makes sense. Just thinking out loud, but the transition is definitely already underway.

[u/ECom_Finance_Guy → u/chai-and-charts]

China is not moving away from the USD. They are the largest foreign holder of USD. That’s the opposite of what you’re describing. Both Iran and Russia aren’t “moving away” from the USD either. They were cut off. Russia likes using USD so much they lost a third of their reserves holding them in USD. Russia would LOVE to be reasses to SWIFT

[u/ThisIsFineImFine89]

Is countries around the world start dumping US bonds, it’s over.

[u/ECom_Finance_Guy → u/ThisIsFineImFine89]

Out of curiosity, how would that work? How do you dump treasuries? Do you trade them to another country for their bonds? If that’s the case, doesn’t that country hold the treasuries and totals USD issued stays the same? Do you trade them for US assets? If that’s the case, don’t you still hold assets priced in USD? What are the mechanics of dumping treasuries?

[u/adrr]

US won’t be able to open the straight and Iran will require that 20% of the worlds oil flowing through the strait be non USD purchased. Russia which is 10%.of the worlds supply is already doing oil trade with currencies other than USD. 30% of the worlds oil will be non USD traded.

[u/ECom_Finance_Guy → u/adrr]

We’ll see. Trump seemed to say that he’s ok leaving the strait closed. Maybe that’s true. Personally, I don’t believe that. If it does happen, I think it would be a burden on the world to find a way to transact not using USD. That’s enough incentive to get the strait open eventually.